AUD/USD: 0.7690EUR/USD: 1.0665 The dollar took another swing to the upside today, in a continued reaction to the hawkish comments from Federal Reserve officials suggesting that a June interest-rate increase could still be a possibility. Equities were positive, while the metals were under a little pressure due to the firm dollar. Today is relatively thin on the data front, with little to provide direction from either the EU or the US, although a couple of Fed board members are due to speak (Lacker/ Kotcherlakota). Before then the main event will be the China CPI, PPI which may cause some movement in the Aud, NZD
The Aud drove to a high of 0.7337 in Europe/US trade where it ran into the daily Kijun/weekly Tenkan, which proved too high a hurdle to overcome and it has since turned lower to consolidate just below 0.7700.
Today’s major event will be the China CPI (exp 1.3% yy, -0.6%mm) and PPI (exp-4.8% yy).
Technically the Aud continues to make a series of short term, higher highs and higher lows. While this continues to be the case the downside seems somewhat limited, but eventually I suspect the support is going to give way for the longer term downtrend to resume. The Iron Ore price decline will eventually flow through to the Aud I suspect and the RBA will not be happy with the level of the Aud, which is making some decent gains on the crosses as well, with EurAud and GbpAud in particular, both sharply lower over the last couple of days.
For now, minor support lies at 0.7650 and then at 0.7630, below which would suggest a run towards 0.7600. I doubt we are heading below 0.7600 today, unless the Chinese data surprises to the downside, but further out the points to watch would be at 0.7559 (11 Mar low) and at 0.7532 (2 April low). Below here, the RBA’s line in the sand at 0.7500 will provide stronger support but a break of which would open up the way to 0.7414 (Oct 2010 low). Beneath this there is a bit of a black hole until the very strong support at around 0.7200, where two important Fibo levels are lining up (0.7210: 61.8% of 0.4773//1.1082 and 0.7180: 76.4% of 0.6006/1.1082). I suspect that eventually 0.7000 will appear on the horizon (and even 0.6000!), but this is going to be some way off yet.
Back above 0.7600 would open up the way for a return to 0.7335 where once again the daily Kijun/weekly Tenkan will act as hurdle but above which would head to 0.7760 and then on to 0.7800, where, as previously, I would be tempted to sell it.
Economic data highlights will include:
M: Home Loans, China CPI, PPI, New Loans.
Jim LanglandsFX Charts www.fxchartsdaily.com
